Q-Series: Future of Farming – will we grow enough food?

The US$1.9trn crop farming economy is at a crossroads – the increasingly urgent need to tackle climate change and protect biodiversity comes at a time when agriculture demand continues to grow in the face of a rising population, growing wealth and consumption. Our analysis suggests that rising global consumption could lead to an 8% crop production shortfall by 2050 if yield growth does not improve from levels seen since 2010, with potential supply deficits occurring as early as 2030. Multiple levers are available to bridge the potential supply gap, which offers structural investment opportunities for both the supply side and demand side of the crop supply-demand equation. We forecast the global crop farming economy to grow by 2.5x to US$6.5trn in 2050 (4% CAGR versus 3% in 2010-2020), while supply-side industries supporting the farming sector should grow by 3x to over US$1trn (5% CAGR). This report leverages the expertise of our global sector, macro, ESG and empirical scientific approaches teams to explore four scenarios, the resulting supply-demand implications and potential levers to bring supply-demand back into balance.

We adopted an empirical approach to forecast future crop demand and predict global consumption to be 61% higher by 2050 relative to 2020 levels. This requires a 57% increase in crop yields in our base case compared to only a 45% rise if yield trends over the past decade persists, failing which cultivated area would need to increase nearly 1m km2 (9% of existing area) to satisfy demand. The alternative outcome would be a rise in agriculture prices to reduce consumption, which would particularly affect lower income households and countries where food expenditure represents a high portion of total spending. We also present an interactive model to isolate sensitivities to the assumptions in our scenarios.

Technological and adoption breakthroughs have led to a step change in crop yields in the US and Brazil in 2000-2010, and breakthrough events elsewhere could provide the needed yield uplift moving forward. This presents the biggest opportunities for seeds & plant genetics companies, where we expect the market size to grow by 3.5x by 2050 (5.3% CAGR), and vertical farming-exposed companies, where we think the market will grow over 30x over the same period (12% CAGR). As over 40% of current crop demand is not for direct human consumption, we also see opportunities to reduce crop demand. Waste and residue based biofuel producers are well placed to replace food-based first generation biofuels while alternative protein growth could reduce feed-related crop demand, offering an aggregate US$300bn market opportunity by 2050 (13% CAGR collectively for alternative protein and sustainable aviation fuel).